(Reuters) — Worsening droughts, storms and downpours in some of the world’s biggest economies could cause $5.6 trillion in losses to the global economy by 2050, according to a report released on Monday.
This year, heavy rains have triggered floods that inundated cities in China and South Korea and disrupted water and electricity supplies in India, while drought has put farmers’ crops at risk across Europe.
Such disasters cost economies hundreds of billions of dollars. Last year’s extreme drought, floods and storms led to global losses of more than $224 billion, according to the Emergency Events Database maintained by the Brussels-based Center for Research on the Epidemiology of Disasters.
But as climate change fuels more intense rainfall, floods and droughts in the coming decades, those costs will soar, warns the report by engineering and environmental consultancy GHD.
Water — when there̵7;s too much or too little — can “be the most destructive force a community can experience,” says Don Holland, who leads GHD’s Canadian water marketing program.
GHD assessed the water risks in seven countries representing different economic and climatic conditions: the United States, China, Canada, the United Kingdom, the Philippines, the United Arab Emirates and Australia. Using global insurance data and scientific studies on how extreme events can affect different sectors, the team estimated the amount of losses countries face in terms of immediate costs as well as to the overall economy.
In the US, the world’s largest economy, losses could reach $3.7 trillion by 2050, with US gross domestic product shrinking by about 0.5% each year until then. China, the world’s No. 2 economy, faces cumulative losses of about $1.1 trillion by mid-century.
Of the five business sectors most critical to the global economy, manufacturing and distribution would be hardest hit by disasters costing $4.2 trillion as water shortages disrupt production while storms and floods destroy infrastructure and inventory.
The agricultural sector, which is vulnerable to both drought and extreme rainfall, could see losses of $332 billion by 2050. Other sectors facing major challenges include retail, banking and energy.
At this year’s World Economic Forum in Davos, Switzerland, a global group of experts launched a new commission to examine the economics of water that aims to advise policymakers on water management.
We need to “transform how we manage water and climate together,” said commission co-chair Tharman Shanmugaratnam. “The costs of doing so are not trivial, but they are dwarfed by the costs of allowing extreme weather to wreak havoc.”